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On Monday, BofA Securities analyst Benjamin Heelan increased the price target for Rheinmetall (ETR:RHMG) AG (RHM:GR) (OTC: RNMBY) shares to €1,900 from the previous €1,450, while maintaining a Buy rating on the stock. The adjustment follows Rheinmetall’s announcement of a memorandum of understanding (MoU) with Lockheed Martin (NYSE:LMT) to form a European missile joint venture. The stock has shown remarkable momentum, with a 202% year-to-date return and current market capitalization of $81.92 billion. According to InvestingPro analysis, the stock is currently trading above its Fair Value, with multiple valuation metrics suggesting rich valuations.
Heelan noted that this joint venture is expected to be a significant aspect of Rheinmetall’s equity story over the next 12 to 18 months. The collaboration aims to focus on key areas such as integrated air and missile defense, long-range strike capabilities, and precision-guided munitions. These are anticipated to be integral to NATO’s forthcoming capability review. The company’s strong financial position is evident in its impressive 50.82% gross profit margin and 41.67% revenue growth over the last twelve months. InvestingPro subscribers have access to over 15 additional key insights about Rheinmetall’s financial health and growth prospects.
The analyst stated that the new joint venture, along with Rheinmetall’s construction of a rocket motor facility in Germany, is predicted to generate substantial revenue for the company in the medium term. This anticipated increase in revenue is believed to justify a higher valuation multiple for Rheinmetall’s defense business. The company currently trades at an EV/EBITDA multiple of 42.5x and a P/E ratio of 93.1x, reflecting market optimism about its growth prospects.
Heelan has raised the target multiple for the defense segment to 16 times enterprise value/earnings before interest and taxes (EV/EBIT), up from the previous 14.4 times. The sum of the parts (SOTP) valuation has been extended to the year 2030, with a projection of €37 billion in group revenues, leading to the revised price objective of €1,900.
The BofA Securities analyst reiterated a Buy rating for Rheinmetall stock, expressing confidence that the company’s portfolio evolution would enable it to capture a larger share of Europe’s defense procurement budget in the medium term and support a higher valuation multiple.
In other recent news, Rheinmetall AG has reported impressive first-quarter results for 2025, with sales reaching EUR2.31 billion, marking a 46% increase from the previous year. The company’s earnings before interest and taxes (EBIT) and profit before tax also exceeded expectations, coming in at EUR199 million and EUR147 million, respectively, surpassing consensus estimates. Additionally, the defense segment experienced a significant surge, growing 73% to EUR1.80 billion. In light of these developments, CFRA upgraded Rheinmetall’s stock rating to Buy and set a new price target of EUR1,913.00.
JPMorgan maintained its Overweight rating on Rheinmetall and raised the price target to EUR1,400, citing anticipated increases in German defense spending as a key factor. UBS also adjusted Rheinmetall’s price target to EUR1,600 while reaffirming a Buy rating, following optimistic discussions with the company’s CEO. BofA Securities increased the price target to EUR1,450, maintaining a Buy rating, and highlighted Rheinmetall’s mid-term growth prospects. UBS previously upgraded Rheinmetall from Neutral to Buy, significantly raising the price target to €1,208.00, reflecting optimism about the company’s potential amid increased defense spending discussions.
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